Please use this identifier to cite or link to this item:
http://hdl.handle.net/10419/40933

Full metadata record

DC Field

Value

Language

dc.contributor.author

Kempa, Bernd

en_US

dc.date.accessioned

2010-10-08T08:59:35Z

-

dc.date.available

2010-10-08T08:59:35Z

-

dc.date.issued

2003

en_US

dc.identifier.uri

http://hdl.handle.net/10419/40933

-

dc.description.abstract

Exchange rates as well as relative price level and output movements are decomposed into components associated with nominal shocks as well as shocks to aggregate supply and aggregate demand. In contrast to previous analyses of such decompositions based on statistical vector autoregression (VAR) analysis, this study takes as a starting point a simple textbook model of exchange rate determination, augments it by allowing for suitably defined random shocks and transforms it into a triangular format resembling the identification procedure of the VAR methodology. Applied to major bilateral exchange rate series, the decomposition suggests that exchange rate variability is mostly driven by shocks to aggregate demand, partcularly in the longer run. Overall, the evidence is roughly in line with previous decompositions obtained from statistical VARs.